Which statement is TRUE?
A) It may be difficult for the Fed to print enough money to have a noticeable effect on the economy.
B) The effectiveness lag associated with monetary policy is likely to be near zero.
C) Monetary policy has no recognition lag.
D) By the time fiscal policy is in place,it is likely that macroeconomic conditions may have changed entirely.

Question

Quizplus · Accepted Answer

Monetary and fiscal policies both have recognition and implementation lags. The statement about the Fed's difficulty in printing money (A) is not accurate because the central bank can significantly influence the money supply. The effectiveness lag of monetary policy (B) is not near zero; it takes time for changes in monetary policy to affect the economy. Monetary policy does have a recognition lag (C), as it takes time to identify economic trends and decide on action. The correct statement (D) highlights the implementation lag of fiscal policy, acknowledging that by the time fiscal measures are enacted, economic conditions might have shifted, making the policy less effective or even counterproductive.

Which Statement Is TRUE